Following several quarters of sluggish results, as well as a damaging phone software glitch, industry is rife with rumors that Siemens AG plans to shake up its mobile-phone business-a move that could involve a teaming with a company like Motorola Inc., an internal reorganization or a sale to a fellow vendor like China’s Ningbo Bird.
Siemens is the world’s No. 4 mobile-phone manufacturer, ahead of the likes of Sony Ericsson Mobile Communications L.P. and LG Electronics Co. Ltd. The company trails Nokia Corp., Samsung Electronics Co. Ltd. and Motorola. Siemens has been suffering through a season of lethargic sales, and its profits have taken a turn for the worse. Further, the company will gain a new chief executive in January-Klaus Kleinfeld will take over for Heinrich von Pierer, a 12-year veteran of the post-who might feel the need to shake up the company’s struggling mobile-phone business.
John Jackson, a mobile-phone analyst with research and consulting firm Yankee Group, said there have long been rumors that Siemens will take some kind of drastic action on its phone business. Several years ago, the company was rumored to be in discussions with Motorola for some type of joint handset agreement.
However, Jackson said Siemens could just as likely stay in the handset business for the long haul to bolster the sales of its infrastructure gear to wireless carriers.
“I think Siemens does see some benefit in keeping a handset unit alongside an infrastructure unit,” Jackson said.
Indeed, Siemens in September said its phones business is an “integral part” of its end-to-end service offering, and it would improve the division with the release of new phones, increased research and development spending, and a reworked software architecture.
Nonetheless, the issue is worth consideration. Last week, a German newspaper reported that Siemens was in discussions to sell its handset business to China’s Ningbo Bird. Siemens earlier this year signed an agreement with Bird to expand its presence in China, as well as to jointly develop new phones.
A Siemens spokesman declined to discuss a potential sale to Bird or a partnership with Motorola, but he did say that the company is working to bring its handset business back to profitability. He said the company plans to release a series of new phones to improve its standing and revenues.
According to reports, Siemens executives have been discussing several potential moves, including a tie-up with another company, a sale or a restructuring. In November, von Pierer said Siemens would “deal with the particular issues at Transportation Systems, Siemens Business Services and Communications (the company’s phone business),” but he did not elaborate. Executives have pointed out that the company-which sells everything from railway cars to medical equipment-mainly sells to business customers and not consumers.
Such tie ups have precident in the wireless industry; Alcatel recently pushed off its handset business on China’s TCL, and Audiovox Corp. recently sold its handset division to UTStarcom.
In its fourth quarter, Siemens posted a $187 million loss in its mobile-phone business compared with earnings of $18.5 million in the same quarter a year ago. For the full year, Siemens posted a $201 million loss on sales of $6.6 billion compared with earnings of $35.8 million on sales of $5.9 billion in the prior year. Siemens blamed the numbers on falling phone prices, driven mainly by Nokia’s price cuts earlier this year, as well as a software glitch in the company’s 65-Series phones. The company said that because of a software defect, when a phone call is cut off due to a low battery, the disconnection melody could start playing loudly enough to cause hearing damage if held up to the ear.
